Sherritt International Corporation · TSX:S
Sherritt International — Q3 2022 Earnings Presentation
40 slides from Sherritt International's earnings presentation, Nov 3, 2022
Slide 1: Q3 Earnings Call
Q3 Earnings Call Review of Financial and Operational Results November 3, 2022
Slide 2: Participants
Participants Leon Binedell President & CEO Yasmin Gabriel CFO
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements. Forward-looking statements can expressed in the forward-looking statements. These risks, uncertainties and other factors overcoming technical and technological challenges; successful environmental assessment an
Slide 4: Q3 Highlights and subsequent events
Q3 Highlights and subsequent events Strong operating earnings and Adjusted EBITDA(1) on higher nickel, and fertilizer sales volumes and prices Signed transformative agreement to collect total Cuban receivables over five years Approved Moa JV expansion program Extended power generation contract to 20
Slide 5: Review of operating results
Review of operating results 5
Slide 6: Moa JV highlights – Q3 Production
Moa JV highlights – Q3 Production Finished Nickel(1) (tonnes) Finished Cobalt(1) (tonnes) 6% 1,261 1,287 12,022 11,326 53% 4,443 419 334 2,908 Q3 2022 Q3 2021 YTD2022 YTD2021 Q3 2022 Q3 2021 YTD2022 YTD2021 • Highest quarterly nickel production since Q3 2018 • On track for guidance for 2022 – cobalt
Slide 7: Moa JV highlights – Production and sales
Moa JV highlights – Production and sales Finished Nickel(1) (tonnes) Finished Cobalt(1) (tonnes) 1,261 12,022 11,393 993 4,443 4,487 419 347 Production Sales Production Sales Production Sales Production Sales YTD 2022 Q3 2022 YTD 2022 Q3 2022 • Sold all of Q3 nickel production • Lower cobalt sales t
Slide 8: Q3 2022 NDCC highlights
Q3 2022 NDCC(1) highlights Q3 2022 NDCC – US$6.76/lb • MPR driven by higher input costs: • Sulphur +131% US$/lb of nickel sold • Diesel +156% • Fuel oil +45% • Cobalt credit impact lower on higher nickel sales volume: • Cobalt revenue only 3% lower than Q3 2021 • Net fertilizer by-product higher on
Slide 9: Power highlights
Power highlights (1) Electricity production (33⅓% GWh ) Unit operating costs(2)($/MWh(3)) 409 $23.14 320 $23.19 $20.04 $18.60 139 110 Q3 2022 Q3 2021 YTD2022 YTD2021 YTD2022 YTD2021 Q3 2022 Q3 2021 • Production increased due to timing of • Unit costs improved due to increased production maintenance
Slide 10: Expansion project update
Expansion project update 10
Slide 11: Expansion projects
Expansion projects • Sherritt Board approved an expansion of US$50 million (100% basis) low capital intensity investment • Focus on improving Moa MSP(1) production to fully utilize existing refinery capacity • Excess MSP is expected to be sold into EV battery market • Total project cost, including S
Slide 12: Pro forma expansion production impact
Pro forma expansion production impact ~20% increase in MSP ~10% Increase in Finished Production after MSP Sales Maximizes production with limited investment in refinery FOR ILLUSTRATION PURPOSES ONLY 12
Slide 13: Expansion Project Update
Expansion Project Update SPP (US$27 million on 100% basis) • Completed 80% of the civil construction • Awarded 96% of material and service contracts • Steel pre-fabrication ongoing with erection commencing in November Moa Processing (US$50 million on 100% basis) • Completed engineering on leach plan
Slide 14: Economic Cut-Off Grade (ECOG) and Life of Mine (LOM)
Economic Cut-Off Grade (ECOG) and Life of Mine (LOM) • Resource model classifications and pit optimization activities completed. • The final development of the LOM is in progress – mine plan sequencing and reserves estimates to be completed during Q4. • Continued engagement with the ONRM1 – alignmen
Slide 15: Financial Highlights
Financial Highlights sherritt
Slide 16: Improved Adjusted EBITDA ($ millions)
Improved Adjusted EBITDA ($ millions) Net loss from Adjusted net earnings(1) from Adjusted EBITDA(1) continuing operations continuing operations $37.4 $17.6 $13.9 $(15.5) $(13.4) $(26.9) Q3 2022 Q3 2021 Q3 2022 Q3 2021 Q3 2022 Q3 2021 • Adjusted EBITDA improvement driven primarily by higher nickel a
Slide 17: Liquidity in perspective
Liquidity in perspective $229M • Increase on strong fertilizer prices and pre-buys $216M for fall season sales Available • Partly offset by: Available Credit Credit $92M • No distributions from the Moa JV $92M • $10.4 million of capital expenditures Other $5M Other $4M • Continue to expect higher H2
Slide 18: Settlement of Cuban receivables – Cobalt Swap
Settlement of Cuban receivables – Cobalt Swap • Encompasses total receivables on a 100% basis, not just overdue receivables • Independent of Cuban partner’s ability to access foreign $362M currency over five years • Annual cash flow of US$114 million through the sale of cobalt (half to settle receiv
Slide 19: Energas Payment Agreement – Moa Swap
Energas Payment Agreement – Moa Swap • Facilitates foreign currency payments for the Energas operations • Funding to support the operating and maintenance US$50M costs of Energas (C$67M) annually • Cover future payments that would be owed to Sherritt • Receive US$4.2 million/month (C$5.6 million) Pr
Slide 20: Modified Dutch Auction and Fixed Price Tender Offer
Modified Dutch Auction and Fixed Price Tender Offer • Announced second offer to repurchase notes outstanding for Key transaction dates aggregate cash consideration of up to $50 million November 3, 2022 at 9:00 a.m. – Offers open for tender • Recent operating performance, strong market fundamentals N
Slide 21: Environment, Sustainability and Governance Update
Environment, Sustainability and Governance Update 21
Slide 22: 2021 Sustainability Report highlights
2021 Sustainability Report highlights • Continued peer-leading safety performance • Experienced zero work-related fatalities at our operations for the sixth consecutive year • Continued to meet safety and production targets at all sites despite the COVID-19 pandemic • Developed a climate plan to adv
Slide 23: Outlook and summary
Outlook and summary sherritt
Slide 24: 2022 Guidance updates
2022 Guidance updates Moa JV Production & Unit Costs • Cobalt production estimated at lower end of range Finished nickel 32,000 – 34,000 tonnes Finished cobalt 3,400 – 3,700 tonnes • NDCC updated on softening of cobalt and Net direct cash cost(1) US$4.50 - $5.00/lb fertilizer prices and logistical i
Slide 25: Q3 Summary and subsequent events
Q3 Summary and subsequent events • Strong Q3 results driven by higher nickel and fertilizer prices and sales volumes • Approved Moa JV expansion to increase intermediate production with low capital intensity • Extended economically beneficial power generation agreement to March 2043 • Finalized an a
Slide 26: Q&A Discussion
Q&A Discussion sherritt
Slide 27: Sherritt International Corporation contact details
Sherritt International Corporation 22 Adelaide West, 42nd Floor Toronto, Ontario, Canada M5H 4E3 Lucy Chitilian, Director, Investor Relations Telephone: (416) 935 -2457 I Toll -Free: 1 (800) 704 -6698 Email: Lucy.Chitilian@sherritt.com I Website: www.sherritt.com
Slide 28: Appendix
Appendix 28
Slide 29: Cobalt Swap Agreement to reduce Cuban receivables
Cobalt Swap Agreement to reduce Cuban receivables 1. Energas and CUPET exchange Sherritt’s entire CSA debt and trade payable – approx. C$362M – with GNC for equivalent loan in Cuban Pesos. Energas/ GNC CUPET 3. GNC redirects its share (1,041 tonnes) of the distribution to Sherritt in exchange for re
Slide 30: Non-GAAP and other financial measures
Non-GAAP and other financial measures 30
Slide 31: Adjusted EBITDA
Adjusted EBITDA The Corporation defines Adjusted EBITDA as earnings (loss) from operations and joint venture, which excludes net finance expense and loss from discontinued operations, net of tax, as reported in the financial statements for the period, adjusted for: depletion, depreciation and amorti
Slide 32: Adjusted EBITDA, cont.
Adjusted EBITDA, cont. $ millions, for the three months ended September 30 2021 Adjustment for Moa Moa JV and Metals Oil and Techno- Joint Fort Site(1) Other Gas Power logies Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 14.6 $ (0.5) $ (2.0) $ 0
Slide 33: Adjusted EBITDA, cont.
Adjusted EBITDA, cont. $ millions, for the nine months ended September 30 2021 Adjustment for Moa Moa JV and Metals Oil and Techno- Joint Fort Site(2) Other Gas Power logies Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 62.1 $ (1.6) $ (10.9) $ (
Slide 34: Unit operating costs/Net direct cash cost
Unit operating costs/Net direct cash cost With the exception of the Moa Joint Venture, which uses NDCC, unit operating cost is generally calculated by dividing cost of sales as reported in the financial statements, less depreciation, depletion and amortization in cost of sales, the impact of impairm
Slide 35: Unit operating costs/Net direct cash cost, cont.
Unit operating costs/Net direct cash cost, cont. $ millions, except unit cost and sales volume, for the three months ended September 30 2021 Adjustment Moa JV and for Moa Fort Site Power Other(1) Joint Venture Total Cost of sales per financial statements $ 92.1 $ 6.5 $ 8.4 $ (79.3) $ 27.7 Less: Depl
Slide 36: Unit operating costs/Net direct cash cost, cont.
Unit operating costs/Net direct cash cost, cont. $ millions, except unit cost and sales volume, for the nine months ended September 30 2021 Adjustment Moa JV and for Moa Fort Site Power Other(1) Joint Venture Total Cost of sales per financial statements $ 308.7 $ 19.1 $ 34.3 $ (263.7) $ 98.4 Less: D
Slide 37: Adjusted net earnings/loss from continuing operations
Adjusted net earnings/loss from continuing operations and adjusted net earnings/loss from continuing operations per share The Corporation defines adjusted net earnings/loss from continuing operations as net earnings/loss from continuing operations less items not reflective of operational performance
Slide 38: Adjusted net earnings/loss from continuing operations, cont.
Adjusted net earnings/loss from continuing operations and adjusted net earnings/loss from continuing operations per share, cont. 2022 2021 For the nine months ended September 30 $ millions $/share $ millions $/share Net earnings (loss) from continuing operations $ 71.0 $ 0.18 $ (27.8) $ (0.07) Adjus
Slide 39: Spending on capital
Spending on capital The Corporation defines spending on capital for each segment as property, plant and equipment and intangible asset expenditures on a cash basis adjusted to the accrual basis in order to account for assets that are available for use by the Corporation and the Moa Joint Venture pri
Slide 40: Spending on capital, cont.
Spending on capital, cont. $ millions, for the three months ended September 30 2021 Total Adjustment derived from Moa JV and Combined for Moa financial Fort Site Power Other(1) total Joint Venture statements Property, plant and equipment expenditures(2) $ 13.3 $ - $ 0.1 $ 13.4 $ (9.9) $ 3.5 Intangib
Sherritt International — Q3 2022 Earnings Presentation on 6ix